Brexit must be carefully-engineered to safeguard industry and secure new trade opportunities

A new report out today urges the Government to hold its nerve and avoid rushing through a ‘clumsy’ Brexit plan that could do lasting damage to UK manufacturing and the wider economy. It calls for a measured and considered approach and for the UK to negotiate a bespoke deal recognising the special relationship it has with the EU. It comes as new findings show that just 5% of UK adults think that loss or damage to the manufacturing sector is a price worth paying for leaving the EU[1]:

Manufacturers must have ongoing access to the single market in goods and services and be able to employ and deploy staff from and across the EU

In the short-term industry wants clarity and certainty in the regulatory and policy environment – in the longer-term it sees an opportunity to pull back from EU regulation where it does not work for the UK

Non-tariff barriers are as significant as tariffs - Government must consult manufacturers on detailed aspects of the negotiations to avoid unintended consequences

Government must seek to maintain the UK’s access and collaborative support for investment and innovation through programmes such as Horizon 2020, even if this means continued payment to EU coffers

Manufacturers are keen to seize post-Brexit opportunities for more global trade through new free trade agreements - top of the trade wish list are the US, China, India and Canada[2].

A new report out today from EEF, the manufacturers’ organisation and Squire Patton Boggs, the global law firm, spells out manufacturers’ key priorities for the forthcoming Brexit negotiations and says that supporting and protecting industry will be critical to ensuring post-Brexit Britain is a great success.

The report – Britain and the EU: manufacturing an orderly exit – points to new findings showing that just 5% of British adults think that loss or damage to the UK manufacturing sector is a price worth paying for leaving the EU[1]. And, while acknowledging that the Government faces a difficult balancing act between free trade and controlling the movement of workers, it warns against rushing through a ‘clumsy’ Brexit plan that could do lasting damage to UK manufacturing and the wider economy.

Instead, it is urging the Government to hold its nerve and deliver a carefully-engineered Brexit that supports investment, ensures business certainty and allows manufacturers to play a full and unfettered role in helping the UK achieve post-EU economic and global trading success.

Key to this is for the UK to negotiate a bespoke deal - as opposed to agreeing to an existing off-the-shelf model (such as the Norway or Swiss models) – which specifically addresses the UK’s needs and recognises the ‘special relationship’ the UK has with the EU.

It is essential to address the uncertainty around the Customs Union - a solution should be sought that enables manufacturers to continue to trade freely with the EU, without significant burden, while also pursuing ambitious international trade deals with countries outside the Union. Over eight in ten manufacturers (84%) export to the EU[3], while almost three quarters of firms (74%) say that a 10% tariff on exports to the EU would have a negative impact on their business[4]. This makes it critical that Brexit negotiations deliver ongoing unrestricted access to this key market.

At the same time, just a third of companies (32%) say they have not experienced any non-tariff barriers, such as regulations and product standards, to trading with other countries[5]. The report states that non-tariff barriers are equally as important as tariffs and must therefore be given level-pegging when negotiating the UK’s exit from the EU, as well as in all future trade deals.

While the referendum result indicated public concern over current rules on freedom of movement, the report says that the Government should seek an alternative that does not compromise the ability of businesses to hire easily, operate smoothly and deploy employees between countries. This is particularly important for manufacturing, which consistently struggles to find enough skilled workers.

For manufacturing, the big opportunity from Brexit is the future expansion of free trade outside of the EU. If harnessed, this could support jobs, growth and wealth generation in the UK. According to the report, just two in ten manufacturers (21%) are not interested in taking advantage and the sector’s horizon is broad, with the US, China, India and Canada, topping the trade wishlist[2].

The report urges the Government to support these trading ambitions and says that in doing so it is likely to find a natural cheerleader in the general public. Almost six in ten UK adults want to see post-Brexit Britain enjoying a better balanced economy (56%), exporting more (58%) and manufacturing more (57%)[6].

Terry Scuoler, CEO of EEF, says: “Rushing through a clumsy Brexit is not in the interests of our sector or the wider UK economy. The Prime Minister is right to hold her nerve and to allow adequate time for the UK’s negotiation strategy to be developed in close consultation with business to ensure the UK’s long-term economic interests are not harmed.

“Manufacturers see great opportunity for jobs, growth and wealth generation from the expansion of global trade outside of the EU. These ambitions tally with those of the Government and the voting public, who want to see post-Brexit Britain exporting and manufacturing more, as well as achieving a better balanced economy. At the same time, our report identifies concerns that our sector’s future success and ability to play its full part could be damaged if the UK fails to secure the right deal.

“The negotiations will inevitably require compromise, but manufacturing has a key role to play in the success of post-Brexit Britain. I would urge the Prime Minister to ensure that any new relationship works for our sector. This means maintaining unrestricted access to the single market and ensuring companies have the ability to hire and post employees across the EU – albeit with more controls in place. In the short-term we want Government to provide regulatory and policy certainty, but in the longer-term there is clearly opportunity to pull back from EU regulation where it does not work for the UK.”

Rob Elvin, partner at Squire Patton Boggs, comments: “While our ability to trade freely with Europe is naturally of immediate concern to UK manufacturers, Brexit has provided an opportunity to create a longer term vision for international trade; one which embraces new and enhanced relationships with established markets like the US and China, fast growing emerging economies and regional trading blocs, such as the ASEAN and Mercosur member states.

“However, fulfilling the government’s ambitions that after leaving the EU, the UK will confirm its place as “one of the great trading nations in the world” requires regulatory stability and continued access to financial support, to ensure our manufacturers remain competitive and have the best platform for future international success. The negotiation of international Free Trade Agreements must also be a priority, but it is important that these are struck after consultation with the industry to ensur that they deliver the best outcomes for British business.”

The full report – Britain and the EU: manufacturing an orderly exit – can be downloaded here.